Kior continued to disclose more bad news in its 10-K filing yesterday. The company reported a loss of $347.5 million loss for 2013. The company operates a plant in Columbus and planned to open a larger one
in Natchez. The legislature approved $75 million in interest-free loans
to Kior in a 2010 special session. The plants are supposed to convert
woodchips into crude oil and gasoline. The project was supposed to
create 1000 direct and indirect jobs in Mississippi as well as
constructing up to five plants. Copy of filing. However, those plans may be pipe dreams. The filing says it all:
We have substantial doubts about our ability to continue as a going concern. To continue as a going concern, we must secure additional capital to provide us with additional liquidity. On March 16, 2014, we received an Investment Commitment letter from Vinod Khosla, pursuant to which Mr. Khosla has committed to invest in us a cash amount of up to an aggregate of $25,000,000 in available funds (either through personal funds, using funds held by a trust or entity he controls or to another assignee), which we refer to as the Commitment.....
Other than the Commitment, we have no other near-term sources of financing. Because the Commitment is subject to the negotiation and execution of definitive financing documents and the achievement of performance milestones, we cannot be certain as to the ultimate timing or terms of this investment. If we are unsuccessful in finalizing definitive documentation with Mr. Khosla on or before April 1, 2014, we will not have adequate liquidity to fund our operations and meet our obligations (including our debt payment obligations) and we do not expect other sources of financing to be available to us. This will likely cause us to default under our existing debt and we could be forced to seek relief under the U.S. Bankruptcy Code (or an involuntary petition for bankruptcy may be filed against us). In addition, any new financing will require the consent of our existing debt holders and may require the restructuring of our existing debt. If we successfully achieve our performance milestones that allow us to receive the full Commitment in the near term, we expect to be able to fund our operations and meet our obligations until August 31, 2014, but will need to raise additional funds to continue our operations beyond that date....
Until recently, we have focused our efforts on research and development and the construction and operation of our initial-scale commercial production facility in Columbus, Mississippi, or our Columbus facility. We did not reach “steady state” operations at our Columbus facility nor were we able to achieve the throughput and yield targets for the facility because of structural bottlenecks, reliability and mechanical issues, and catalyst performance. In January 2014, we elected to temporarily discontinue operations at our Columbus facility in order to attempt to complete a series of optimization projects and upgrades that are intended to help achieve operational targets that we believe are attainable based on the design of the facility. While we have completed some of these projects and upgrades, we have elected to suspend further optimization work and bring the Columbus facility to a safe, idle state, which we believe will enable us to restart the facility upon the achievement of additional research and development milestones, consisting of process improvements and catalyst design, financing and completion of the optimization work. Unless and until we restart the Columbus facility, we expect to have no production or revenue from that facility.
Kior also recorded "impairments" of $196.3 million in December. The company states it only has assets barely worth more than the $75 million in loans it received from Mississippi: "Our total assets were $86.1 million, $296.0 million and $305.3 million at December 31, 2013, 2012 and 2011, respectively". Ah yes, the $75 million loan. The company states on page 13:
As of February 28, 2014, we had aggregate indebtedness of $279.5 million. In December 2012, we began making semi-annual payments of $1.9 million under our loan with the Mississippi Development Authority, or MDA, which we refer to as the MDA loan, on June 30 and December 31 each year, which we must continue to make until maturity. If we do not successfully secure the funds under the Commitment, we do not, without additional financing, have the funds needed to make our payment due to the MDA on June 30, 2014, which would constitute a default under our MDA Loan. In addition, we must make specified investments within Mississippi by December 31, 2015, including an aggregate $500.0 million investment in property, plant and equipment located in Mississippi and expenditures for wages and direct local purchases in Mississippi totaling $85.0 million. Of the total amount committed to be spent, $218 million has been spent on plant and equipment as of December 31, 2013, leaving an amount of $282 million remaining to be invested, while expenditures for wages and direct local purchases totaled approximately $51 million at December 31, 2013 leaving $34 million remaining to be spent. Based on our current estimates, we believe that we will be unable to meet the specified investment requirement in property, plant and equipment and certain other expenditures in wages and direct local purchases under our MDA loan and if the Columbus facility is not operating for a significant portion of 2014, we expect we will be unable to meet the specified expenditures for wages and direct local purchases. Failure to meet these requirements would constitute a default under our MDA loan. Any defaults under our MDA Loan could, in turn, result in cross defaults under our other loan facilities.
Then there is this little matter of an SEC investigation (p.28):
On January 28, 2014, the SEC served us with a subpoena, pursuant to a formal order of investigation, seeking documents about, among other subject matters, the progress at our Columbus facility and the timing of projected biofuel production levels. We are committed to cooperating with the SEC and responding to the subpoena request. It is not possible at this time to predict the outcome of the SEC investigation, including whether or when any proceedings might be initiated, when these matters may be resolved or what, if any, penalties or other remedies may be imposed.
Needless to say, Kior saw its share price decline today and in after-hours trading. It dropped 8 cents to $1.07 per share when the market closed and another 33 cents in after hours trading to 74 cents per share (A decrease of 30%). The market cap is $118 million.
Kior halts production to make improvements
Kior lawsuit alleges shareholder fraud. Mississippi has $75 million at stake.
Kior doubles down in Columbus
As the Kior stock turns